The challenge

Norsk Hydro suffered from a lack of real-time cash visibility in addition to an ambition to improve and increase the speed of the accounts payable (AP) and accounts receivable (AR) reconciliation. This was a result of its traditional set-up whereby conventional account statements were only received from its CM banks end of day, and then, only covering the previous day’s transactions. The company needed an ‘out-of-the-box’ solution to enable provision of real-time reporting information. This would bring a myriad of benefits including increased visibility, faster decision making and better control of risk.

“Our aim was to build and deploy a tool with real-time reconciliation capabilities and superior liquidity management and cash forecasting, incorporating our real-time balance and transaction reporting from our bank accounts directly into our SAP system via APIs,” explains Per Christian Lindgård, Head of Cash Management.

The solution

The company joined forces with J.P. Morgan and Findroids to develop a real-time reconciliation package, seamlessly embedded in SAP and connecting to the bank via API. This provides Norsk Hydro with instant visibility of global bank account balances and transactions whilst reconciling against its ledger. The solution consists of a standardised real-time transaction reporting and reconciliation package that includes:

• Ready built SAP adapter to connect to the bank’s real-time APIs.
• Real-time transaction reporting.
• Real-time automated reconciliation in SAP ledgers.
• Automated update of cash forecast report during the day.
• Faster access to data, which helps the company to compile their audit report to ensure automated day-end reconciliation.

Best practice and innovation

Norsk Hydro is the first company to have installed, tested and implemented, for around 120 of its accounts around the globe, real-time reconciliation, and reporting; all in less than two weeks of working effort. All data is imported directly into the existing SAP infrastructure. This enables seamless integration into existing processes and data flows by reusing existing AR/AP reconciliation functionality. Upgrading to real-time reconciliation/postings in the SAP Financial Ledger gives Norsk Hydro’s AP/AR team a refined and automated process, reducing the need for manual intervention and a faster clearing of open items. It is also a game changer for enhancing the quality of the data previously received through normal bank statements (Camt and MT messages) to support and further improve straight-through-processing (STP) of payments as the company is in the process of implementing with its other cash management banks over the coming months.

The speed and ease of the implementation is a best in class example of how nimble and powerful APIs can be deployed within global corporate treasury structures at pace.

Key benefits

• Supports business growth:
  • Enhanced credit management allows the company to focus on bad debt.
  • Smoother collaboration between AR and business.
• Improve financial performance:
  • Reduced days sales outstanding (DSO) frees up liquidity.
  • Improved cash forecasting allows for more active management of balances.
  • Faster handling of unreconciled items helps improve KPIs.
• Minimal technical disruption:
  • Limited technical resource requirements.
  • No disruption to reconciliation rules pre-defined in SAP s/4hana.
  • No changes required to existing master data.

“Not only have we harnessed the power of real-time technology to improve our visibility and reconciliation processes, but we’ve done so in a best in class way,” says Lindgård.

The Adam Smith Awards is the industry benchmark for best practice and innovation in corporate treasury. The 2021 Awards attracted a record-breaking 309 nominations spanning 40 countries. To find out more please visit: https://treasurytoday.com/adam-smith-awards.